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Tuesday, September 2, 2008

Alpha To Put US$1.2b In Asian Properties

Source : The Business Times, September 2, 2008

ALPHA Investment Partners, the fund management unit of Singapore's No 3 developer Keppel Land, said its new fund will invest US$1.2 billion into Asian retail, residential and hospitality property by 2011 despite a global slowdown.

The group, which closed the Asia Macro Trends fund in July, now has five Asia-focused funds with S$3.9 billion in property assets under management.

Mr Loh: Prefers investing in market conditions, like now, where there is less capital chasing assets

'Our strategy is not premised on the fact that Asia has decoupled. We have a eight to 10 year horizon and from what we can see, the region will do well in the medium to long-term,' Alpha managing director Loh Chin Hua told Reuters in an interview yesterday.

'It is very much a play on increasing affluence of Asian economies and domestic consumption, and the increase in flow of capital and trade within Asia,' Mr Loh said.

The new fund has set an internal rate of return of 16-18 per cent and has so far invested US$41 million in a hotel near South Korea's Incheon Airport, and US$30 million in a stake to build a Hong Kong hotel with an unlisted local developer.

'It's assets like these that we think will do well despite the poor economic conditions,' Mr Loh said, adding that the Korea hotel already provides a yield higher than the projected 17.3 per cent.

Mr Loh, who led the Government of Singapore Investment Corp's London- based Europe real estate division before he helped found Alpha in 2003, said he is more prudent about the office and logistics sectors as these have already seen strong growth.

The poor economic and credit conditions, ignited by the US sub-prime mortgage crisis, provide an opportunity to invest as there is less competition for good assets, said Mr Loh.

'There could be some dislocations in the short term, but we see it as opportunities rather than a threat. I would rather be investing in market conditions like these where there is less capital chasing assets.'

Asia's developers are also more willing to accept property funds as equity partners for their projects, Mr Loh said, as other sources of financing become more expensive after banks turned increasingly prudent about lending.

Alpha's earlier funds include one focusing on Asia-listed securities such as real estate investment trusts, or Reits, and a Japan-focused fund.

Mr Loh declined to reveal how many more funds Alpha plans to launch or give a target for assets under management, but said he expects fund flows to Asia to grow strongly due to heightened interest from US and European pension funds.

'We would expect their allocations to Asia real estate to increase. And within Asia, we are also seeing sovereign funds from countries like South Korea and Japan starting to look outside their domestic markets.'

Income from Keppel Land's fund management business, which comprises Alpha and property trust K-Reit Asia , nearly tripled to S$9.4 million for the six months to June 2008, compared with S$3.4 million a year earlier.

Asia's top developers, such as Cheung Kong , CapitaLand and Mitsui Fudosan, have also set up property fund management units in recent years, for the fee income and to tap new funding sources for growth. -- Reuters